Gold breached 1817.05 support, and dipped to 1810.07 earlier today but quickly recovered. Bias stays neutral for some more consolidations first. In case of another recovery, we’d expect upside to be limited by 1863.51 resistance to bring fall resumption.
Current decline from 1959.16 is seen as the third leg of the pattern from 2075.18. Decisive break of 1817.05 should target 1764.31 support and below.
China’s GDP grew 6.5% yoy in Q4, accelerated from prior quarter’s 4.9% yoy, beat expectation of 6.1% yoy. Overall, GDP grew 2.3% in 2020, making it the only major economy that avoided a contraction, due to the coronavirus pandemic that started with outbreak in Wuhan.
December data were mixed. Industrial production grew 7.3% yoy, accelerated from 7.0% yoy, beat expectation of 6.9% yoy. Fixed asset investment grew 2.9% ytd yoy, below expectation of 3.2% ytd yoy. Retail sales grew only 4.6% yoy, slowed from 5.0% yoy, missed expectation of 5.50% yoy.
Hong Kong HSI trades mildly higher today in response to the releases. HSI is now pressing an important resistance level, with 100% projection of 21139.26 to 26782.61 from 23124.25 at 28767.60, as well as medium term channel. Decisive break of the level will confirm upside acceleration. More importantly, rise from 21139.26 should finally b e seen as developing into a long term up trend.
NIESR estimated a 0.9% growth in UK GDP in Q4 of 2020, implying a total contraction of -9.8% for the whole year. With tight restrictions and some post-Brexit adjustment, Q1 is forecast to have negative growth on -3.4%. It added, “the short-term negative economic impact of lockdowns should be outweighed by the potential positive long-term health and economic impacts from controlling the virus and restoring confidence.”
“Today’s ONS data confirm a significant slowdown in the last quarter of 2020, despite November’s lockdown in England clearly having a far smaller effect than the first. Surveys and high frequency indicators suggest that recovery from the Covid-19 shock was weak even before a third lockdown become necessary in January. Temporary and permanent adjustments post-Brexit transition period are likely to also weigh on growth in the early part of 2021, but the vaccine roll-out provides some encouragement for consumption and investment in the second half of 2021 and beyond. The economic impact of the lockdowns is clearly negative in the short-term but will be significantly positive in the medium term if successful in controlling the virus and restoring confidence.” Rory Macqueen Principal Economist – Macroeconomic Modelling and Forecasting
US retail sales dropped -0.7% mom to USD 540.9B in December, much worse than expectation of 0.0% mom rise. Ex-auto sales dropped -1.4% mom, well below expectation of -0.1% mom. Ex-gasoline sales dropped -1.2% mom. Ex-auto, ex-gasoline sales dropped -2.1% mom.
PPI came in at 0.3% mom, 1.8% yoy, matched expectation. Core PPI was at 0.1% mom, 1.2% yoy, below expectation of 0.2% mom, 1.3% yoy.
Empire State general business condition index was dropped to 3.5, below expectation of 5.7.
UK GDP dropped -2.6% mom in November, better than expectation of -4.0% mom. That’s the first decline since six consecutive monthly increases. GDP was back to -8.5% below the levels seen in pre-pandemic February. Also, GDP dropped -8.9% in the 12 months to November, comparing with the annual decline of -6.8% to October.
Services was the main drag on growth, down -3.4% mom due to restrictions. Services was -9.9% below February’s level. Production dropped -0.1% mom, at -4.7% below February’s level. Construction rose 1.9% mom, at 0.6% above February’s level.
Also release, goods trade deficit widened to GBP -16.0B in November, versus expectation of GBP -11.1B.
US President-Elect Joe Biden outlined his USD 1.9T fiscal package a the remarks from Delaware overnight. The package include USD 1T in direct relief to households, with stimulus checks for USD 1400 on top of the USD 600 checks in last congressional stimulus. USD 440B will be used for small business and communities. USD 415B will be used on virus responses and vaccine rollouts.
Stock markets had very little reactions. DOW traded in very tight range and closed down -0.22%, or -68.95 pts, at 30991.52. There is no change in the near term bullish outlook with 29881.82 support intact. We’re expecting another rise, sooner or later, to 61.8% projection of 18213.65 to 29199.35 from 26143.77 at 32932.93.
Fed chair Jerome Powell said yesterday that “now is not the time to be talking about exit” from the asset purchase program. He added, “another lesson of the global financial crisis, is be careful not to exit too early.”
“We’ll let the world know. We’ll communicate very clearly to the public and we’ll do so, by the way, well in advance of active consideration of beginning a gradual taper of asset purchases,” he added. “That wouldn’t be a reason to raise interest rates unless we see troubling inflation or other imbalances that could threaten achievement of our mandate.”
On the outlook, Powell said, “we’ve got to get through this very difficult period this winter with the spread of COVID, but as the vaccines go out and we get COVID under control, there’s a lot of reason to be optimistic.”
US initial jobless claims rose 181k to 965k in the week ending January 9, well above expectation of 785k. Four-week moving average of initial claims rose 18.3k to 834.3k.
Continuing claims rose 199k to 5271k in the week ending January 2. Four-week moving average of continuing claims dropped -59k to 5216k.
In the accounts of December 9-10 monetary policy meeting, ECB noted “market sentiment had improved notably following the news of the successful development of vaccines and on account of expected monetary policy measures.” But uncertainty “remained high” and concerns were voiced over exchange rate developments, and the “negative consequences for the inflation outlook.”
The resurgence of the pandemic, downward revision in inflation forecasts and risk of unanchoring inflation expectations, “additional monetary policy measures were necessary”. However, the “current environment warranted a recalibration of policy instruments… rather than the adoption of additional measures”.
“The expansion and extension of PEPP purchases and the recalibration of the TLTRO III conditions were widely seen as the most suitable tools to ensure that financing conditions remained favourable throughout the pandemic.”
Bitcoin’s break of 36649.0 resistance argues that the correction from 41964.0 has completed at 30635.0 already, after hitting 4 hour 55 EMA. The support from 36649.0 resistance turned support further affirms upside bias. Retest of 41964.0 high.
The depth of the correction might have met target, but the time spent is a bit too short. Hence, we’re not expecting sustained break of 41964.0 high yet. Instead, another falling leg is likely, to make the consolidation an three-wave pattern. Break of 36649.0 will argue that the third leg has started, for another take on 30k handle.
EUR/CAD’s decline from 1.5783 accelerates after taking out near term trend line support, with 4 hour MACD diving down too. The development is in line with our view that corrective rise from 1.5313 has completed with three waves up to 1.5783. More importantly, the pattern from 1.5978 is resuming with another falling leg.
Further decline is now expected as long as 1.5534 resistance holds. Break of 1.5402 support will solidify this bearish case. Retest of 1.5313 should be seen next. And 100% projection of 1.5978 to 1.5313 from 1.5783 at 1.5118 should be the eventual near term target.
In USD terms, China’s exports rose 18.1% yoy to USD 281.9B in December. Imports rose 6.5% yoy to USD 203.8B. Total trade rose 12.9% yoy to USD 485.7B. Trade surplus came in at USD 78.2B, above expectation of USD 72.0B.
For the whole 2020, exports rose 3.6% to USD 2591B. Imports dropped -1.1% to USD 2056B. Total trade rose 1.5% to USD 4646B. Trade surplus was at USD 535.0B.
BoJ Governor Haruhiko Kuroda told branch managers in a quarterly meeting, “domestic economic conditions remain severe due to the impact of coronavirus infections at home and abroad but we have seen a pickup.”
“Japan’s economy is likely to improve as a trend as the impact from the pandemic gradually subsides, although the pace will be moderate as caution over COVID-19 persists,” he added.
“The BOJ will scrutinise the impact of the pandemic for the time being and stand ready to take additional easing steps without hesitation if needed,” he said.
Boston Fed President Eric Rosengren said in an interview that “labor market is going to be stagnant for the next couple months until we have much more widespread vaccinations.” But going into Q2, ” I’m hoping enough people are vaccinated that we can start spending, particularly in those areas where we haven’t been able to spend,” he added.
Some sectors are most impacted by the coronavirus pandemic, including accommodation, food and entertainment. Rosengren said they will need more fiscal support, until vaccines make it possible for consumers to return. In particular, a fiscal program that provides grants to struggling businesses maybe one of the most effective ways to support mid-sized companies.
In a speech, Fed Vice Chair Richard Clarida outlined six features of the new framework adopted last fall.
In a speech, Fed Governor Lael Brainard said that “given my baseline outlook, I expect that the current pace of purchases will remain appropriate for quite some time.” The outlook is “highly uncertain” and forecasts are “subject to revisions. The forward guidance is, thus, “outcome based and tied to realized progress on our goals.”
Looking ahead, “effective vaccines and additional fiscal support are important positive developments”. However, “the near-term outlook is challenging due to the resurgence of the pandemic, and the economy remains far from our goals.”
In particular, “the damage from COVID-19 is concentrated among already challenged groups”, she added. “The K-shaped recovery remains highly uneven, with certain sectors and groups experiencing substantial hardship.”
US CPI rose 0.4% mom in December while core CPI rose 0.1% mom. Both matched expectations. On annual basis, CPI accelerated to 1.4% yoy, up from 1.2% yoy, above expectation of 1.3% yoy. Core CPI was unchanged at 1.6% yoy, matched expectations.
ECB President Christine Lagarde said in a at the Reuters Next conference that Bitcoin is a “highly speculative asset, which has conducted some funny business and some interesting and totally reprehensible money laundering activity”. As for crytopcurrencies in general, she said, “there has to be regulation. This has to be applied and agreed upon … at a global level because if there is an escape that escape will be used.”
Bitcoin’s pull back from 41964.0 was a bit deeper than expected. But is quickly recovered back above 4 hour 55 EMA and settles in range. Though, as recovery attempt was so far held by 55 H EMA, another fall would be mildly in favor, but 30k handle should provide enough support for now. Meanwhile, a break above 36649.0 resistance will suggest that the correction has completed, and bring retest on the high.
GBP/CHF rides on broad based rally in Sterling this week and breaks through 1.2118 resistance. The development suggests resumption of the rise from 1.1683. Further rally is expected as long as 1.2054 support holds, for 1.2203/59 resistance zone. Decisive break there will resume whole rebound from 1.1102 to 61.8, projection of 1.1102 to 1.2259 from 1.1683 at 1.2398.
If happens, that would be a bullish medium term development too, as GBP/CHF could then sustain above 55 week EMA.
 
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Bitcoin recovery capped at 40k, started third leg of consolidation pattern
Current development, with break of a near term channel, suggests that bitcoin’s recovery from 30635 has completed at 40000 already. Consolidation pattern from 41964 high should have started the third leg. Deeper decline is now in favor back to 30635.
For now, we’d expect strong support around 30k psychological level to contain downside. In case of a deeper than expected correction, bitcoin could dip into support zone between 100% projection of 41964 to 30635 from 40000 at 28671 and 38.2% retracement of 17629 to 41964 at 26924, before making a bottom.